Can any one explain the difference between PAYE and and going through A pay company?

Question

Just got an office job contracting through an agency, the have put me in contact with a pay company who are offering PAYE or some other form of payment where i would be claiming lots of expences to make my money up! i will recieve more by the secound way but not sure if it benifits in the long run! can any one fill me in with some details on how it works or what is the best way to go!

Answer 1

Unless you have a decent understanding of what the Inland Revenue (HMRC) requires, in the way of records and Tax Returns, from someone whom is Self Employed, I would suggest you stick to PAYE ..

Answer 2

how it works is that the company that administers the scheme will ask you to fill in a weekly or monthly expenses sheet.  They then work out what your net pay would be if they operated normal paye and use that net pay figure to work backwards adding on the tax free expenses and grossing back up to arrive at a much reduced gross pay figure for national insurance purposes.

Your actual take home pay will usually be unaltered, however the gross pay is much less and therefore the company pays less employers national insurance to the government.

Its a very iffy poisition as the expenses are open to disallowance unless they already have some form of agreed dispensation with the tax office.

In short its a national insurance fiddle (they benefit not you), at present its just about within the legislation but its certaninly sailing close to the wind especially for office workers.   Its more commonly seen within the construction industry where a worker uses his own vehicle to travel to various work sites - the biggest provider of the service was a firm called Gabem who got absolutely clobbered off the tax man a couple of years ago.

Just bear in mind that if you approach a lender for borrowing they'll not take into account the expenses and you'll have a much lower gross income for borrowing purposes.